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How to insure a self-driving car

By Jay MacDonald ·
Friday, January 31, 2014
Posted: 6 am ET

While it may be premature to hail our robot overlords just yet, the word out of Detroit suggests that we could well find ourselves riding shotgun in our own self-driving vehicles sooner than anyone expected.

Ford Motor Co. is the latest automaker to come forth with such plans, revealing that it aims to have "fully autonomous navigation and parking" on its fleet by 2025. Nissan had previously announced that it will roll out its first model that doesn't need you by 2020, and the folks who've been limo-lounging in the back of that Google self-driving Toyota Prius say robo-cars could join the commute sooner than that.

Auto industry consultant IHS Automotive predicts the first self-driving vehicles will hit the market in 2025 and comprise 9 percent of annual auto sales a decade later.

Future shock for insurers

While the thought of Siri taking the wheel is a mind-blower for most of us, the eventuality is stirring deep concern within the auto insurance industry. If, as projected, self-driving vehicles do result in a substantial drop in serious automobile accidents by removing us accident-prone humans from the equation, it follows that auto insurance rates should slowly decline as well.

In fact, in his 2012 paper, "A Scenario: The End of Auto Insurance: What Happens When There Are (Almost) No Accidents," Donald Light, director of research firm Celent's American property/casualty insurance division, predicts that robo-cars could cut insurance premiums by more than 60 percent by the end of the decade. Celent estimates that the property and casualty insurance industry derives 40 percent of its premiums from auto insurance.

"If I were running a big auto insurer, this is something I'd spend time thinking about," Light says.

To which Scooby-Doo might add, "Ruh-roh."

A sudden drop in revenue isn't the only challenge facing auto insurers as driverless vehicles pull up to the curb. Imagine trying to determine who's at fault when an accident occurs and no one is at the wheel. And who gets the traffic ticket, General Motors? Rest assured that legal minds are already searching for the answers.

If you can't beat 'em ...

Fortunately, some insurers are looking on the bright side. Having fewer accident claims should be a good thing, right? State Farm, for one, has opted to view its robo-coupe as half full by partnering with Ford and the University of Michigan to help develop the automaker's land-based Jetsons fleet.

Loretta Worters, vice president for the Insurance Information Institute, doesn't necessarily see the self-driving revolution as a zombie apocalypse for auto insurers.

"If driverless cars become a reality, and if, as a result, there is a dramatic reduction in the number and severity of vehicle-related accidents, there is no doubt it is going to have a major impact on auto insurance," she told the Chicago Tribune. She says auto insurers will simply "have to adapt," even by going so far as to expand into other lines of insurance unrelated to autos.

Might I suggest robot insurance?

Follow me on Twitter: @omnisaurus.

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July 09, 2014 at 7:05 am

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